Money and Wealth (Part 25) - Bankruptcy; Cosigning; Insurance

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Money and Wealth (Part 25) - Bankruptcy; Cosigning; Insurance; Being Rich (Part A) III. Bankruptcy 1. Bankruptcy is the legal process whereby a debtor can be relieved of some or all of his debts he owes to his creditors. 2. “Bankruptcy is a legal proceeding in which you put your money in your pants pocket and give your coat to your creditors.” (Joey Adams) 3. Bankruptcy is not scriptural. A. The concept of having a judge order a creditor to forgive a debt is not Biblical. B. It is up to the mercy of the creditor as to whether or not he will forgive a debt (Mat 18:26-27; Luk 7:41-42). C. In the Bible there was the concept of debtor’s prison (Lev 25:39; 2Ki 4:1; Mat 18:23-25, 28-30). D. There were debtor’s prisons in America until the mid-1800s where people who could not pay their debts would be incarcerated until they worked off the debt they owed. E. If we still had debtor’s prison today, people would be much more careful about how much debt they took on. IV. Being surety 1. Surety n. - II. Means of being sure. 5. A formal engagement entered into, a pledge, bond, guarantee, or security given for the fulfilment of an undertaking. 7. A person who undertakes some specific responsibility on behalf of another who remains primarily liable; one who makes himself liable for the default or miscarriage of another, or for the performance of some act on his part (e.g. payment of a debt, appearance in court for trial, etc.); a bail: = security 9. A. A man that is surety for a friend has put himself under legal obligation to guarantee the payment of his debt or other obligations. B. “Cosigning” is another term for being surety. C. A man who is surety for another assumes the blame if the obligation is not fulfilled (Gen 43:9). 2. The Bible warns us of the danger of being surety for another’s debt (Pro 6:1-5). 3. A stupid person strikes hands and becomes surety in the presence of his friend (Pro 17:18). A. His friend is present when he does it which implies that he is striking hands with a third party for the benefit of his friend (c/w Pro 6:1). B. A man that becomes surety for his friend is stupid (void of understanding) (Pro 17:18). i. It is a good way to go broke if something happens and your friend can't pay (Pro 22:26-27). ii. It is a good way to lose a friend if he can't pay. iii. It is a good way to get sued or killed if you don't have the money to pay your friend's debt if he defaults. C. If a man that becomes surety for a friend is stupid, then a man that becomes surety for a stranger is exceedingly stupid. i. A friend will be more likely to pay his debt so you're not left on the hook for it. ii. A stranger has little to no incentive to pay it because he doesn't know you and will likely never deal with you again.  iii. Thus, he that is surety for a stranger shall smart for it (Pro 11:15). (i) Smart v. - 1. intr. Of wounds, etc.: To be a source of sharp pain; to be acutely painful. (ii) Solomon is trying to spare his son pain. iv. If a man is stupid enough to be a surety for a stranger, you better take some collateral from him to hedge against the likelihood that neither he nor the stranger will pay (Pro 20:16). 4. He that hates, and therefore stays away from, suretyship is sure (Pro 11:15). A. Sure adj. - 1. a. Free from or not exposed to danger or risk; not liable to be injured or destroyed; = safe a. 6, secure a. 3. B. It is always a safe bet to not be a guarantor of someone else's debt. 5. You should never be cosign for someone else for anything, even if he is family. A. A person should not be going into debt for anything with the possible exception of buying his first house (and even borrowing money for this should be avoided if at all possible). B. All other things including cars, home maintenance and upgrades, appliances, tools, equipment, furniture, four-wheelers, motorcycles, boats, other toys, etc. should be paid for in cash. i. If a person doesn't have the cash to pay for something, he can't afford it, and he shouldn't buy it. ii. You certainly should not cosign for a loan for any such thing. C. If a man wants to finance a house or a business startup, the bank will determine if he is creditworthy. i. If he is not creditworthy, and they will not give him a loan, then you would be a fool to cosign for him. ii. If the bank is dumb enough to give him a loan but he can't afford the down- payment, then you would be a fool to loan it to him. D. The reason a person needs a cosigner is because the bank does not think he will repay the loan. E. Why in the world would you put yourself on the hook for a man’s debt whom the bank thinks will not repay? F. If you cosign on a loan for someone, if he cannot or will not pay for any reason, the bank will come after you for the payments. G. Avoid cosigning like the plague. 6. In Pro 6:1-5, Solomon instructs us on how to deliver ourselves if we have been foolish enough to be surety for another. See sermons on Pro 6:1-5 in the Proverbs series for a full exposition of these verses (https://pastorwagner.com/proverbs-commentary). I. Insurance 1. Insurance is risk mitigation. A. Bad things sometimes happen to good people (remember Job?). B. In a world where families and communities don’t take care of their own, insurance becomes a necessity. i. The early death of a husband without life insurance could mean poverty and desperation to a wife, especially one with young children. ii. Without home insurance, a house fire or a tornado could mean great financial hardship. iii. Without health insurance, one accident or disease could easily bankrupt you. C. Prudent people will foresee the evil and hide themselves from it (Pro 22:3). 2. There are some types of insurance you should have. A. Life insurance i. Don’t waste your money with whole-life insurance or any other life insurance except term-life. (i) It’s very expensive and does not give you a good return on investment. (ii) Get a cheap term life policy (more on this below), and invest the money you would have paid into a whole-life policy. (iii)“…you never want to use an insurance plan as an investment. Insurance is for insurance. It costs you money because you’re transferring risk. Keep your investments separate and you’ll always come out ahead.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, p. 166) (iv) This is only true if you actually save and invest the money you would have paid into your whole-life policy. (v) If you are undisciplined and will just blow the money, you may as well get a whole-life policy and then you will have something saved instead of nothing. ii. Get a term life insurance policy which will cover you until your early-to- mid-60s. (i) Term life insurance is dirt cheap compared to whole life insurance. (ii) Dave Ramsey recommends getting a term life policy for 10-12 times your annual income. (iii)Stay-at-home mothers should have a term life policy also which will cover the cost of child care and possible maid services in the event she dies. iii. By the time you’re 60, your house should have been paid off a long time ago, your kids are grown, you should have no debt, and you should have a large amount of money saved for retirement. iv. If you die after age 60, you should be “self-insured,” meaning that your wife should be able to live on your savings for the rest of her life. B. Health insurance i. One major illness or injury could ruin you financially if you do not have health insurance.  ii. High-deductible, high out-of-pocket-maximum policies will save you money. iii. Health cost sharing ministries are much cheaper than health insurance. (i) I have used Christian Healthcare Ministries for over a decade. I am a cash-payer when it comes to routine medical care such as doctor’s appointments, urgent care visits, etc. (ii) However, I get free telemedicine which includes unlimited virtual doctor and urgent care visits. (iii)If I end up in the hospital for something, CHM reimburses me for the cost after my personal responsibility amount of $3,000 has been paid. (iv) My CHM plan costs $180/month per person regardless of age (all children in the family are covered as one person) for unlimited coverage per illness. (v) Health insurance costs many times this much. C. Home insurance i. A fire, tornado, or another natural disaster could leave you in serious financial distress without house insurance. ii. You should not be without it. D. Car insurance i. Liability insurance is a must (and legally required). ii. Dave Ramsey recommends at least $500,000 in liability insurance to protect yourself from bankruptcy in the event you are at fault for a major accident. iii. Depending on the age and value of your car, collision and comprehensive coverage is a good thing to have. iv. If your car is old and not worth much, you should do the math to see if having full coverage on it is worth it. v. High-deductible policies will save you money. If you have a car fund with plenty of money in it (and you should), paying the deductible if something happens should be no big deal. 3. Some other types of insurance you should consider. A. Long-term disability insurance i. This coverage can often be purchased through one’s employer at a reasonable rate. ii. It might be a good idea for the provider of a family to have just in case. B. Long-term care insurance i. Nursing homes are very expensive. ii. Missouri is the second cheapest state in the US for nursing home care, costing $5,262/month for semi-private care and $5,931/month for private care. This is about 57% of the average cost in the United States. (Nursing Home Costs by State 2024, worldpopulationreview.com) iii. Nevertheless, it would still cost MO residents approximately $63,144/year to live in a nursing home. iv. A few years (or months for a lot of people) of that will wipe out most people’s savings, leaving nothing for their spouses, and no inheritance for their children. v. Long-term care insurance isn’t extremely expensive if you get it by age 60.  (i) “The average cost of long-term care insurance is $1,200 a year for a 60-year-old man for $165,000 coverage, according to the American Association for Long-term Care Insurance (AALCI). The average long-term care insurance cost for a 60-year-old woman is $1,960 for the same coverage. “Married couples can buy a more affordable joint policy. For instance, married couples who are 60 years old pay $2,550 annually on average for a joint policy with $165,000 coverage, but that comes with a combined coverage limit rather than two separate limits.” (What Is The Cost Of Long-Term Care Insurance?, Forbes.com, 8-5- 2024) vi. If you manage your money during your lifetime like you have learned in this series, you will quite likely have enough money to hire someone to live with you and provide you with in-home 24-hour care instead of going into a nursing home. vii. In-home care will likely not cost any more than living in a nursing home.